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Carl Menger

Carl Menger (23 February 1840 – 26 February 1921) was an Austrianeconomist and the founder of the Austrian School of economics. Menger contributed to the development of the theory of marginalism (marginal utility), which rejected the cost-of-production theories of value, such as were developed by the classical economists such as Adam Smith and David Ricardo. Menger used his "Subjective Theory of Value" to arrive at what he considered one of the most powerful insights in economics: both sides gain from exchange.

Reference

"Carl Menger was a professor of economics at the University of Vienna and the founder of the Austrian School of economic thought. Among economists, he ranks as the 19th century's greatest contributor to the theory of spontaneous order—the social-scientific tradition supporting the libertarian view that a free society can generate beneficial and sophisticated institutions without state involvement. Menger's highly original approach to the formation of market prices and institutions marked an important advance over the classical economics of Adam Smith ..."

Born

Died

Biography

"Austrian School founder Menger (1840-1921), along with but independently of William Jevons and Leon Walras, developed marginal utility analysis. This shows that the value of something in the marketplace is ultimately determined by customers. For instance, if we're very thirsty the first few drinks might be worth a lot of money to us, but as we become satisfied the value (or marginal utility) of each additional glass declines. Menger observed that private individuals, not governments, developed the essential social insitutions of a free society, such as language and money."

Web Pages

"Carl Menger was an economic theorist and professor. Chiefly notebooks, notes, teaching materials, correspondence, biographical and personal material, and printed material (7500 items, 10 lin. ft; dated 1857-1985), relating to Menger's academic career, 1867-1920. The bulk of the collection consists of Menger's notes and revisions on economic and theoretical topics, and on his first major work, Grundsätze der Volkswirthschaftslehre. Includes extensive material about money, the gold standard, and capital theory. ... Letters to Menger are primarily from colleagues of the Austrian school of economists ..."

"Despite the many illustrious forerunners in its six-hundred year prehistory, Carl Menger (1840-1921) was the true and sole founder of the Austrian school of economics proper. He merits this title if for no other reason than that he created the system of value and price theory that constitutes the core of Austrian economic theory. But Menger did more than this: he also originated and consistently applied the correct, praxeological method for pursuing theoretical research in economics. Thus in its method and core theory, Austrian economics always was and will forever remain Mengerian economics."

Book Review: Principles of Economics by Carl Menger, by Roger Ream, The Freeman, Feb 1982
Review of Menger's Grundsätze der Volkswirtschaftslehre (Principles of Economics) which, although first published in German in 1871 was only translated to English in 1950

"... it was Menger's Grundsätze (1871) ... that began the modern period of economic thought. Significantly, Menger's ideas provided the foundation for what is today classified as the Austrian School of economics. ... Menger is perhaps best known for his development of marginal utility theory, discovered almost simultaneously by Jevons and Walras. ... It was Menger who elaborated the logical foundations of marginal utility theory and it was his Principles specifically that served as the basic textbook for the Austrian economists (Bohm-Bawerk, Mises, and Hayek in particular) who followed him."

"Menger argued that the labor theory of value was flawed in presuming that the value of goods was determined by the relative quantities of labor that had been expended in their manufacture. Instead, Menger formulated a subjective theory of value, reasoning that value originates in the mind of an evaluator. ... Labor ... like raw materials and other resources, derives value from the value of the goods it can produce. From this starting point Menger outlined a theory of the value of goods and factors of production, and a theory of the limits of exchange and the formation of prices."

Government: Creator of Uncertainty, by Murray Rothbard, Future of Freedom, Jul 2000
Discusses economic subjectivism, the principle that different persons attach different values to things or events, as evidenced by the early 2000 stock market downturn

"Up to the time of Carl Menger, founder of the Austrian school in the late 19th century, much of classical economics was preoccupied with what was regarded as objective, wealth for example, which purportedly existed apart from human plans and purposes. Menger put acting, valuing man at the center of economic study. For Menger, understanding economic phenomena meant seeing them through the eyes of the relevant actors. ... In a market economy consumers endow objects with value, then, following Menger's key principle, value flows from those objects back to the factors of their production."

Hayek and the Scots on Liberty [PDF], by Gerald P. O'Driscoll, Jr., The Journal of Private Enterprise, 2015
Explores the influence of the eighteenth-century Scottish moral philosophers, mainly David Hume and Adam Smith, on Hayek's thinking about liberty and concepts such as natural law theory

"Menger ... argued that a 'portion' of social phenomena 'is not the result of agreement of members of society or of legislation'. He continued: 'Language, religion, law, even the state itself, and, to mention a few economic social phenomena, the phenomena of markets, of competition, of money, and numerous other social structures are already met with in epochs of history where we cannot properly speak of a purposeful activity of the community as such directed at establishing them'. On the same page, he then famously posed 'perhaps the most noteworthy problem of the social sciences.'"

"Then Mises had a revelation: 'Around Christmas, 1903, I read Menger's Grundsatze der Volkswirtschaftslehre [Principles of Economics] for the first time. It was the reading of this book that made an "economist" of me.' ... Menger's great book, published in 1871, presented a case that prices reflected the subjective values of customers in free markets. ... Menger further resolved the question of value by what came to be known as marginal utility analysis."

"Hayek was drafted into the Austrian army in March 1917 ... He contracted malaria but passed time reading about the Austrian School of economics which maintained that market prices are driven by the subjective valuations of customers. 'I really got hooked,' he recalled, 'when I found [Carl] Menger's Grundsatze [Principles of Economics] such a fascinating book, so satisfying.' Hayek was especially interested in Menger's "conception of the spontaneous generation of institutions.'"

Books

Carl Menger and His Legacy in Economics
by Bruce Caldwell (editor), 1991
Annual supplement to History of Political Economy, volume 22; papers of conference held 15-17 Apr 1989 to commemorate acquisition of the Menger papers

Books Authored

Investigations into the Method of the Social Sciences, 1883
Partial contents: Economics as a Theoretical Science and Its Relationship to the Historical and Practical Economic Sciences - The Historical Point of View in Economic Research - The Organic Understanding of Social Phenomena

Principles of Economics [PDF], 1871
Contents: The General Theory of the Good - Economy and Economic Goods - The Theory of Value - The Theory of Exchange - The Theory of Price - Use Value and Exchange Value - The Theory of the Commodity - The Theory of Money